It’s raining
hedge funds all
over! Seeing the Indian startups at a crucial juncture , the offshore investment
funds are aiming to bank upon
early-stage startups such as
Zop-Now, Vserv and
MobiKwik, s
ays an Economic Times report. But as these
investors plant themselves
firmly in India's startup
landscape, analysts as well
as entrepreneurs are doubtful
about the funds' potential to
abruptly pull out in a crisis,
as they did during the
economic downturn that began
in 2008.
A long-anticipated interest
rate hike by the US Federal
Reserve, the ongoing Eurozone
crisis, and flat economic
growth in the Asia-Pacific
region could force hedge
funds to slow their pace of
startup investments in India,
experts told the financial
daily. "Hedge funds, above
all, need liquidity. They
have redemption windows.
Instead of investing in an
unlisted company, if they can
get the same risk-reward by
investing in a publicly
listed entity, they will
obviously swap," Srinivas
Baratam, managing director at
investment bank Kriscore
Financial
Advisors told the
ET.
Overall, 14 hedge funds
including new entrants such
as Maverick Capital, Tree
Line Asia and Dragoneer
Investment Group participated
in transactions worth about $
3.8 billion in Indian
companies since the beginning
of 2014, according to Tracxn,
which tracks startup activity.
These deals accounted for 31.
3% of the total $12 billion
pumped into Indian tech
companies in the past 16
months.
Ashish Goel, founder and
chief executive of Urban
Ladder in which Steadview
Capital led a $20 million
round in July 2014, believes
hedge funds have a capacity
to be long-term investors
comparable with venture
capitalists.
Nonetheless, many startups
scampering for hedge fund
money are covering bases by
also seeking out other
classes of investors.
(Image: India times)
